Taking out a personal loan can feel like every part of your financial life is under the microscope. No matter how much or how little you are borrowing, your lender will scrutinise your application and come to a decision based on several key factors. Understanding these factors is key to increasing your personal loan eligibility.
Choose the Right Lender
To give yourself the best possible chance of approval, you should carefully consider the lender before you submit your personal loan application. Where possible, go with an institution which you already have a financial relationship with. Providing you have had a good relationship with them already, and have not missed any payments on existing loans, it will put you in the best possible position to have your loan accepted.
Another way to increase your personal loan eligibility is by opting to borrow from smaller institutions. Smaller lenders have much more flexibility and leeway in who they accept for personal loans. Large institutions have to be strict in their personal loan eligibility criteria and have little room for negotiation.
Ensure You Have an Accurate Job Title
In addition to verifying that you are in full-time employment, many lenders will ask for a job title. They use this information to cross-reference your job title with your salary. This is one-way lenders protect against fraud and predict how likely you are to default on a personal loan. Engineers, for example, are often offered lower interest rates as statistically, they are less likely than their peers to default on repayments.
Have a Genuine Reason for Taking out the Loan
Lenders usually ask for what purpose you are taking out the personal loan. If you have a valid reason, like to pay for a wedding, carrying out repairs on your property, or buying a new car, the lender will be able to see that you are using the money to make a large, one-off purchase and are not in financial difficulty and looking to use it for day-to-day living.
Have the Right Documentation
Many borrowers find their personal loan applications get rejected because their application is incomplete and there is a lack of supporting documents. Create a checklist once you know what documentation your lender requires and ensure you have gathered all the documents from your creditors, employers, and existing financial institutions.
Pay Off any Outstanding Smaller Personal Loans
If you have paid off everything you owe already, lenders are much more likely to approve your application for a larger personal loan. They measure your debts against your take-home pay. In paying off existing debts, you will have a larger take-home income and, will, therefore, increase your eligibility.
In controlling all of these variables, you are putting yourself in the best possible position for approval. However, it is important to maintain a realistic outlook. If your credit score and income to debt ratio does not meet the lender’s eligibility criteria, you may not be approved for the loan.
Above all, it pays to be honest. Taking out a loan based on false information poses a real risk to your future financial security. Maximize your personal loan eligibility by providing accurate, detailed information, supported by the right documentation.